YUM! Earnings Preview: Janney’s “Got a Bad Feeling” About China

By Ben Levisohn

Reuters

Yum! Brands (YUM) is scheduled to report earnings after the close today–and Janney’s analysts Mark Kalinowski and Amy Babington have a sinking feeling about what the report will say.

Like just about everyone out there, the analysts are worried about Yum’s troubles in China. “We believe that incremental news out of China — Yum’s most profitable and important market — is likely to be mostly… disturbing,” Kalinowski and Babington say. Dashes and ellipses there’s.

Emerging markets make up about 60% of Yum’s protists, with China by far the most important. As a result, they’ve slashed their earnings and same-store-sales forecasts to “reflect the possibility that issues in China will hamper results in that key region for longer than we were previously assuming,” they write.They cut EPS estimates to $3.53 from $3.65 for 2013, and to $4.10 from $4.23 for the fourth quarter.

Still, investors are well aware if Yum’s China troubles, Kalinowski and Babington, and Yum has experienced other crises in China and survived them, and this time shouldn’t be any different. They reiterate their Buy rating on the stock–but only for long term investors. And if Yum’s shares fall after the report tonight, they say it could be a buying opportunity.

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FEBRUARY 5, 2013 4:14 A.M.

balij wrote:

I was bang on target with my prediction in Yesterdays article about YUM.. Because China disappoints

1. There is nothing wrong with numbers as far as this quarter is concern because YUM came with good earnings momentum in this quarter
2. Problem is Forecast and the only thing responsible for that is China. Same think happens on 29 November 2012 when yum slides 10% due to china controversy. So in my opinion we should keep our distance from yum stock due to instability

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Emerging markets have been synonymous with growth, but the outlook for individual nations is constantly changing. Countries from Brazil and Russia to Turkey face challenges including infrastructure bottlenecks, credit issues and political shifts. Barrons.com’s Emerging Markets Daily blog analyzes news, data and research out of emerging markets beyond Asia to help readers navigate the investment landscape.

Barron’s veteran Dimitra DeFotis has been blogging about emerging market investing since traveling to India and Turkey. Based in New York, she previously wrote for Barron’s about U.S. equity investing, including cover stories and roundtables on energy themes. Dimitra was among the first digital journalists at the Chicago Tribune and started her career as a police reporter at the Daily Herald in the Chicago suburbs. Dimitra holds degrees from the University of Illinois and Columbia University, where she was a Knight-Bagehot Fellow in the business and journalism schools. She studies multiple languages and photography.